Courting Courts & Goodbye Again

 

Courts Asia was relisted on 15-Oct-2012 @ $0.77 after a series of restructuring by Baring Private Equity. On 18-Jan-2019, Nojima Corporation offered to acquire the company for $0.205. 

 

Despite much effort to grow its business; Courts revenue peaked at $830M in FYMar18, and have been trending down since. The firm is likely to record losses for FYMar19. 

 

A series of macro events led to the company's predicament: 

i.  Singapore property cooling measures moderated demand.

ii.  Malaysia Consumer Regulation caping interest rate at 15% challenges their prevailing business model.

iii. Expansion to Indonesia faces headwind as Rupiah weaken against SGD and USD.

 

As a result, Malaysia earning fell from a high of $39M FYMar16 to $6M in FYMar18. Indonesia earning remain in red at $10M in FYMar18. While Singapore earning held steady with slight firmness. 

 

The company is a recognisable brand in South Asia and have reasonable distribution roots in Singapore, Malaysia and Indonesia. However, its the soft elements that should concern the business the most. The company products and services in general lack focus and excitment in a crowded retail market. E-commerce giants are also constantly chipping away its businesses. 

 

Staying the same is no longer an option. As operating profit weaken; financing cost will become a sizeable burden to the firm.  

 

Nojima offer price of $0.205 is at a discount of 45% to book value. Which beg the question if this is reasonable; given that Courts was trading at $0.152 prior to the offer. That Baring/SRG is willing to dispose of all its share at offer price indicate that the current modus operandi is no longer effective and new management, ideas & approaches is required.